Pilon Clauses: No Clawback For Misconduct

Cavenagh v William Evans Ltd [2012] EWCA Civ 697

The Court of Appeal has held that an employee who had his employment terminated on the basis that he would receive a payment in lieu of notice remained entitled to the payment, even though his employer had later discovered his gross misconduct was sufficient to warrant summary dismissal.

Facts

Having confirmed that it would make a payment in lieu of notice, the employer subsequently discovered Mr Cavenagh's gross misconduct and decided not to honour its agreement to pay him in lieu, arguing that it was discharged from its obligation to do so in light of the misconduct that had been discovered. The County Court dismissed Mr Cavenagh's claim for recovery of his notice pay as a debt. It did so on the basis that the prior gross misconduct gave the company a complete defence to the claim. The Court of Appeal overturned the County Court's decision and held that the company owed the notice pay as a debt. Having considered earlier decisions relevant to the issues, the Court held that there was no authority that after-discovered misconduct provides an employer with a defence to an action for payment of a debt. Neither was there any contract law principle which precluded Mr Cavenagh from recovering the debt owed to him.

Comment

This decision...